Second, the proportion of profit in the economy has increased dramatically. Now admittedly, I can’t find the data tonight and it’s tedious to extrapolate it form the ONS web site (which is a nightmare). So I’ll quote from Howard Reed writing on this issue for the TUC instead, who looked at pretty much the inverse ratio, the wage share over time:
The wage share of income is not the inverse of the profit share of income. So, sorry laddie, but you just cannot make this claim.
Income is, in the sense that we are talking here, divided into the following:
Employer paid taxes on wages.
Mixed income (this is income from self-employment. We don’t really know how much of this is returns to capital or returns to labour. So it is measured separately).
And some other stuff. Like Ritchie I’m not bothering to look up the full set of figures.
Now, over the decades that Howard Reed has looked we’ve had significant changes in employers’ NI. Again, without looking it up, it’s from something like 6 or 7% to the 13.8% today. And I vaguely recall that it used to be capped but is no longer.
Further, consumption taxes have radically changed. When you look at the graphs used you’ll see that the peak of the wages share was around 1975 or so. Which is usefully just around the time that we introduced VAT. We did have some sales taxes before that but nothing like the rate of breadth of VAT, further, the VAT rate has risen substantially since.
I don’t know but I’d be willing to bet that self-employment has grown substantially over these decades as well, leading to a rise in mixed income.
All of which will depress the wages share of income. But which won’t increase the profit share of income at all.
It’s entirely possible that the profit share of income has risen. But the figures Ritchie is using here don’t show it. For he’s either ignorant of the figures he’s quoting or deliberately doing it to mislead. As is Reed but then at least Reed is going it for money from the TUC and thus has an excuse. Selling your professional reputation for geld is an excuse isn’t it?